My Lords, we have had an outstanding maiden speech. We have two more to come, and I am sure that they will enrich this debate and the House, for which we are grateful.
In the Queen’s Speech we were promised both a health and social care Bill and a new single state pension. Why does this new single state pension matter so much? It matters because private occupational pensions do not really work for those with few other assets, the low paid, the self-employed, part-time workers, those with caring responsibilities and, above all, women. Think about it. To get a useful occupational pension, you start contributing young. You and your employer contribute enough throughout your working life. You stay in full-time work for 40 years, you gain from tax relief, you can manage investment and disinvestment strategies and DC schemes, and you do not need to touch your pension savings because you can access other savings. Not one of those propositions fits most women or, indeed, many low-paid men. You could not devise a worse fit for women if you tried.
A woman’s earnings are interrupted by childcare from her late 20s and elder care from her 50s. Work is part-time, low-paid and unpensioned. There is little or no gain from tax relief and little or no ability to manage DC investment. There are little or no other savings, so if she faces divorce, debt or disability, she cannot access her own pension savings; she can access only the moneylender, at higher cost. None of it works for her. That is because pensions were built by men for men to smooth the income from work into retirement. Yet for most women, their working life needs more smoothing than the move into older age. Therefore, they will always need a decent state pension, which is why I welcome the new single state pension so much.
The new single state pension will do five key things. First, as it is not dependent on waged work, it can credit in women’s hugely valuable caring work, around which our society pivots and which occupational pensions can never support. It therefore strengthens the contributory principle on which a decent social security system rests.
Secondly, it will offer a more adequate platform for retirement. A couple—he on average wage, she in part-time work—might bring home, say, £30,000 a year. With a combined new state pension of £15,000, and perhaps his small pension of £5,000, so £20,000 in total, they will have an earnings replacement of two-thirds before you count in the savings from no work-related costs. That is adequate.
Thirdly, the previous Government significantly reduced pensioner poverty. However, while means-tested pension credit lifted significant numbers of elderly poor pensioners out of poverty, it had the perverse incentive of discouraging future pensioners from saving. The new state pension, because it is above the means-tested benefit level, will make it safe to save. Every penny the woman hairdresser or the shop assistant puts away in a NEST, she will gain in full.
Fourthly, people will be able to plan for their retirement, knowing what they can rely on from the state in their older age—a simple, predictable, risk-free and adequate foundation pension. It will be genuinely transforming for many women and low-paid people in the future.
Finally, there is much talk about increased life expectancy—one year more for every five—but, on a point to which I shall return, for most people those extra years will not be years of good health. However, a good state pension, money, will do much to help stave off disability. It will buy heating, better food, cleaning and taxis—all to be welcomed.
I will say a word or so about universal pensioner benefits. Do not touch bus passes, which address the issue of pensioner isolation. Do not means test because a third of pensioners do not claim means-tested benefits, and the whole point of the new single state pension is to get rid of means-testing. You could tax, but, particularly with winter fuel benefits, which are expensive, you would get in very little—I calculate that it would be about £100 million. Instead, given the new state pension in 2016, we could postpone winter fuel payments alongside TV licences for that generation and for future new pensioners until they reach 75. Age is quite a good proxy for need—older pensioners are poorer pensioners, such as elderly widows whose husbands have died and whose occupational pensions have died with them—and I calculate that within about five years we would save about £1 billion a year and upwards. It is only a thought, but it would be simple, universal, targeted, fair and affordable.
However, if you really wanted to save on the pensions bill while increasing fairness, you would seek to tackle tax relief. It costs nearly £40 billion a year, of which two-thirds goes to the wealthiest. It is a shadow welfare state costing almost as much as the basic state pension itself. Given tax relief and national insurance, which should be levied on those of us who work beyond state pension age; given that we have an upper earnings limit at all, which is not defensible at all, which makes national insurance regressive and whose abolition would bring in £11 billion; given equity release—more than £1 trillion is locked away in housing equity and only between £0.5 billion and £1 billion is released every year; we have plenty of resource both for adequate state pensions and for social care if we seek to address and distribute the resources that we already have.
I make one final point. We need to think differently about life after 65. Increased life expectancy is not, for the most part, increased healthy life expectancy. The extra years are largely years of poor health. Most of us can expect three stages of older age: a decade or so of healthy life, and the number of healthy years is not really increasing by much, except for the better off; a decade of some limiting disability, such as a lack of mobility, the inability to reach or difficulty in hearing, but with care needs sufficiently modest that, along with telecare, they can normally be met at home; and between two and five years of frail dependency, including dementia, during which substantial personal care is needed.
It is the second stage—a limiting disability—that in my view, from all the research that I have studied, is lengthening with increased longevity. Funding and supporting that stage is not actually expensive, especially given that half the growth in the number of older people is the result of increased longevity and half is from a bulge in the number of older people coming through from the baby boom. When that is played through in the next 50 years or so, we will have just about the best worker to pensioner ratio in Europe.
When we hear all those siren calls to raise the state pension age in line with increased longevity, we should pause.
In Norwich, the difference in life expectancy between the poorest and richest ward in my city is 11 years. The gap in healthy life expectancy between those two wards is 15 years and widening. Eight in 10 better-off men but only three in 10 poorer-off men will survive to 80. Therefore, in all fairness, the state pension age should rise only with any rise in the years of healthy life expectancy, not with any overall increase in longevity, which is mostly disability-accompanied, otherwise the years of healthy retirement for half the population—the poorer part—as a proportion of their adult life will actually shrink: a profoundly unfair outcome for profoundly unfair lives. We can all do better than that.